My Business Plan

 

My Business Plan

 

 

Business Plan Financial Section

Santa Fe’ Restaurant

Name:

Date:

My Business Plan

Purpose

The primary aim of this business plan is to illustrate the expected capital investments into the proposed and the respective anticipated revenues over a period of two financial years. This is essential to illustrate the viability and profitability of the business. In addition, the success of the business would be attributed to providing customers with a high level of ambience, service and food with respect to customer expectations and market trends.

Introduction

The restaurant will focus on providing specialty foods menus using themed menus and nights. In addition, the restaurant aims to provide exceptional customer experiences through quality food, high-class service and observing high levels of customer service. Santa Fe’ Restaurant will be located in an upscale location with the aim of attracting high-end consumers. This will enhance the opportunities and possibilities of profitability as such a location is informed by the high disposable incomes of such a clientele.

Summary

Projected Sales

The first year is anticipated to see an increase in the sales figures. This will enhance the ability of the organization to undertake its monthly payments for liabilities. In addition, the first year will witness positive growth in its sales figures largely attributed to enhanced sales activities using a variety of media outlets such as radio, newspapers and excellent customer service (Pearce, 2011).

Figure 1: Sales Graph-1st Year

Capital Balances

The capital balances decline on an annual basis and monthly basis, as capital needs decline with the increase in net profits realized from the investments. In addition, the business would be able to recoup the initial amounts invested into the business through activities and cost savings.

Figure 2: Capital Balances (National Restaurant Association)

Net income

Figure 3: Changes in Net Income

Basis for Financial Projections

1. Sales Projections

The sales projections provided for the two financial periods are based on the estimated number of patrons expected in the respective financial years. In addition, the sales projections are estimated from industry trends in terms of the rates of success and data from similar entities starting out in affluent locations for high-end clientele. The cost of meals is based on starting estimates, which shall be reviewed at the end of the financial period for appropriate adjustments. Lunch is provided at $10 per individual and $20 for dinner per individual. The revenue for the first year is anticipated to be in the range of $729,800 with subsequent increases expected in the preceding financial period (Chambers, 2008).

1. Cost of Food and Beverage Sales (Cost of Goods Sold)

The cost of goods are estimated based on the National Restaurant Association which projected that the costs of goods sold accounted for 33% of the total sales revenue accruable to an entity. In addition, the costs of goods sold are the costs associated with purchase of raw materials and the respective inputs associated with the finished product or dishes served to the consumers. It is anticipated that the costs of goods sold are set to in crease with respect to the growth of sales figures during the two financial periods. This is attributed to increased activities as well as anticipated changes in commodity prices due to inflationary pressures and market factors. the costs food and beverages all make up more than 30% of the sales revenues accrued to the business during the two financial periods (National Restaurant Association).

• Food and beverage inventory (based on industry average inventory turnover ratio)

The industry trends provide an effective source of information towards estimation of food and beverage inventory at the entity. Inflationary adjustments and allowances for increase in the cost of food and beverages are also factored in the estimates. The figures are also indicative of the gradual trends towards increased consumption and high sales on a month-to-month basis.

The costs provided in this section are prone to inflationary pressures and market conditions and thus an allowance should be provided during the financial year. This is an effective means of dealing with possible increases in food prices given the growing levels of worldwide concern over increase in global food prices. The food and beverage costs have been provided as stock in the balance sheet and as the cost of goods sold in the two financial periods.

1. Payroll Expense, including Officers Salaries and Employee Benefits

The estimates of the salaries and wages issued are provided based on industry estimates and the national minimum wages and salaries for respective positions identified in the payroll. In addition, the minimum wages and salaries for the positions identified were used as the primary basis for developing the payroll. Other unforeseeable factors that may increase or decrease the estimates on wages and salaries have not been factored in the payroll. The expanses are provided at 33% of the overall sales based on average industry estimates provided by the National Restaurant Association.

The payroll consists of office staff. Cook, servers, and bookkeeper. The total costs associated with maintaining this payroll amounts to $ 133,442. The figures are based on industry estimates. In addition, the costs can be estimated to be within the range of 30% of the sales revenues accrued by the business. They form a significant cost for the business and there is need to develop strategies for reduction and managing costs associated with labor.

1. Rent Expense (Occupancy Cost) per lease agreement

The rent expense is provided based on market trends with respect to selected locations that would be suitable for high-end business such as a restaurant. In addition, the estimates are also provided with an allowance for rent adjustments with increase in the revenues and overall net profit provided for the business. The rent expense for the first year has been projected to be at $43,721 and $51,771for the second financial year. In addition, the rent accrues monthly costs of $2,000 plus 3% of the gross revenues accrued in the month. In addition, the space provided is for an estimated 10 four-seater tables and 10 two-seater tables.

1. Advertising Expense

The advertising expense was provided as estimates with respect to the cost of the entire venture. The entity will rely on exceptional service and customer services as the primary form of advertising its quality food, services and ambience. As the business grows, there is need for aggressive and active marketing using avenues such as social media; television advertising; print advertising in newspapers, magazines and other editorials. The costs were provided based on an incremental approach with respect to the role of advertising in enhancing sales revenues for the business in the two financial periods.

• Depreciation Expense

There are three primary assets held by the business that can be subjected to depreciation over the period of use, which is estimated to be 5years based on the lease to be obtained. They include:

• Kitchen equipment  (60,000) =20% or $12,000 depreciation value annually or $1,000 monthly
• Leasehold improvement (40,000) =20% or $8,000 depreciation value annually or $667 monthly
• Office equipment              (10,000) =20% or $2,000 depreciation value annually or $167 monthly depreciation

The depreciation has been estimated to be 20% with no resale value for the selected assets held by the entity because of constant usage and rates of decline in value with respect to anticipated levels of use and consumer oriented activities.

• Other operating expenses (consider Restaurant Association’s industry average)

Other operating expenses estimates are based on the need to develop a safety net with respect to costs associated with operating activities in the business. The associated are costs that are difficult or impossible to trace with respect to the revenue generating activities in the organization. They may include small items in the business, administrative supplies and miscellaneous costs that were paid by way of cash or checking accounts. They consist of overheads associated with revenue generating activities. In addition, they are also termed as allowances for possible increases in the operating expenses of the entity and thus provide a safety net in the budget estimation process (Chambers, 2008).

Breakeven Analysis

BEQ = Fixed costs / (Average unit price – average unit cost)

Average unit price

Dinner= $20

Lunch= $10

Average cost- (20+10)/2= $15

Average unit cost

Lunch=6.7

Dinner=13.40

Average cost= (13.40+6.7)/2= $10.05

Fixed costs

Operating Expenses-$272,728

BEQ =$272,728/ ($15-$10.05)

BEQ = $272,728/4.95

BEQ = 55,097 meals on average to be consumed for the business to break even

Based on the estimated daily transactions, it is estimated that the business would be able to breakeven after sale of 55,097 based on the average cost of the meals and the average revenue contributions made by the meals. The total estimates for the meals vary from one month to another. The average estimates for the meals sold amount to 44276/12= 3690 meals per month. In addition to achieve break even the entity would have to make sales of 55097/12=4,591 meals on a monthly basis as the respective average sales (Chambers, 2008).

References

Chambers, K. D. (2008). The entrepreneur’s guide to writing business plans and proposals. Westport, Conn: Praeger.

Lloyd, D. (2007). Business plans. London: Hodder Education.

McKeown, W. (2012). Financial planning. Milton, Qld: John Wiley and Sons Australia, Ltd.

Pearce, L. M. (2011). Business plans handbook: A compilation of business plans developed by individuals throughout North America. Detroit, Mich: Gale.

National Restaurant Association (n.d.). Operating Ratios. Retrieved September 23, 2008, from http://www.restaurant.org/research/op_ratios.cfm

Timmons, J. A., Spinelli, S., & Zacharakis, A. (2004). Business plans that work: A guide for small business. New York: McGraw-Hill.